SOAS Department of Economics Working Paper Series No XXX

Please cite this paper as:

No. 198

Developing or Under-developing?

Implications of China’s “Going

out” for Late Development

by

Dic Lo

(July 2016)

Department of Economics

SOAS, University of London

Thornhaugh Street, Russell Square, London WC1H 0XG, UK

Phone: + 44 (0)20 7898 4730 Fax: 020 7898 4759

E-mail: [email protected]

http://www.soas.ac.uk/economics/

Dep

art

men

t of

Eco

nom

ics Working Paper Series

ISSN 1753 – 5816

Lo, Dic (2016), “Developing or Under-developing? Implications of China’s ‘Going out’ for

Late Development”, SOAS Department of Economics Working Paper No. 198, London:

SOAS, University of London.

tel:%2B%2044%20%280%2920%207898%204730

The SOAS Department of Economics Working Paper Series is published electronically by

SOAS, University of London.

© Copyright is held by the author or authors of each working paper. SOAS Department of

Economics Working Papers cannot be republished, reprinted or reproduced in any format without

the written permission of the paper’s author or authors.

This and other papers can be downloaded without charge from:

SOAS Department of Economics Working Paper Series at

http://www.soas.ac.uk/economics/research/workingpapers/

Research Papers in Economics (RePEc) electronic library at

http://econpapers.repec.org/paper/

http://www.soas.ac.uk/economics/research/workingpapers/

http://econpapers.repec.org/paper/

SOAS Department of Economics Working Paper No 198 – 2016

1

Developing or Under-developing?

Implications of China’s “Going out” for Late Development

Dic Lo*

Abstract

Since the turn of the century, China’s influence on world development has increased

enormously. This paper seeks to analyse major attributes of the influence of China’s “going

out”, centring on the argument that the influence has been in the main conducive to the rest of

the developing world. Specifically, this paper offers a critique of relevant, popular theses such

as “China’s neoliberalization crowds out world development”, “China under-cuts the

conditions of the world’s working class”, and “China exhibits a tendency towards

imperialism”, etc. It is argued that, in the context of a neoliberal world economy that is

increasingly speculation-oriented, China’s production-oriented activities can be seen as an

important countervailing force. Whether this China influence is to continue to be conducive to

world development in the future, or to turn to become detrimental, depends critically on the

broader political-economic context.

Keywords: China, trade, investment, world development.

JEL classification: F54, F60, O14, O50.

*SOAS, University of London. Address for correspondence: Department of Economics, SOAS, University of

London. Russell Square, London WC1H 0XG, UK. Tel: +44 207 898 4532. Email: [email protected]

mailto:[email protected]


2

1. Introduction

Since the turn of the century, China’s influence on the world economy has increased enormously. It

has become the biggest trading economy in the world. It is a major recipient of inward investment,

and exporter of capital both in the form of direct investment and financial flows. In recent years, it has

initiated a range of international programmes aimed at reshaping the economic landscapes of the

world. All these developments have given rise to widespread concerns over the nature of China’s

“going out”. Specifically, is it an intrinsic part of neoliberal globalization, or else? What are its

implications for the rest of the developing world?

There exists a body of studies that is fundamentally critical of China’s “going out”. In the

early years of the century, the concerned scholars put forth the argument that the expansion of China’s

international trade is to the detriment of world development, either because it crowds out

manufacturing exports from other developing economies or because it implies Chinese labour under-

cutting the working class of the world as a whole. This argument is closely related to the view that

Chinese political economy has already become neoliberal capitalist. In more recent years, there has

emerged the further view that Chinese political economy has even become imperialist. Hence, in this

view, China’s “going out” is in the main an imperialist force that exploits the rest of the developing

world – thereby pushing the world towards underdevelopment.

To engage with this body of studies needs both empirical analysis and theoretical

clarification. The purpose of this paper is precisely to undertake such a task. Foreshadowing, it will be

argued that the thesis of crowding-out might have elements of empirical truth, but this cannot be said

to be caused by China’s trade expansion. It is further argued that the under-cutting thesis is wrong,

because China’s trade expansion has been sustained mainly by productivity growth rather than the

(super)exploitation of labour. In consideration of the broader context of a neoliberal and financializing

world economy, and in terms of its working dynamics, Chinese political economy is not at all clearly

neoliberal. Even more dubious is the thesis of Chinese imperialism. In view of the actual form of

imperialism in our times, namely, the predominance of financial hegemony, it can be argued that

China’s “going out” has hitherto acted as a countervailing force, rather than an accomplice.

The paper is divided into six sections, of which this introduction is the first. Section two seeks

to construct a general picture of the main attributes of China’s “going out” thus far. Section three

critically reviews the theses of crowding-out and under-cutting, in relation to the indicated attributes.

Section four attempts a characterization of the dynamics of world development in the era of neoliberal

globalization. The proposition is that insofar as imperialism does exist, it takes the form of financial

hegemony on the world scale. Section five assesses China’s “going out” in the context of the world

dynamics characterized in the previous section. Section six concludes.


3

2. China’s “Going out”: the General Picture

China (mainland) became the world’s top merchandise exporter in the year 2009, and has remained in

that position thereafter. In 2014, its share of the world total of merchandise exports was 12%. In

comparison, the share accounted for by the United States, Japan and Germany was 9%, 4%, and 8%,

respectively. In terms of the sum of merchandise exports and imports, in 2014, the world share of

China, the United States, Japan and Germany was 11%, 11%, 4%, and 7%, respectively.1 Taking into

account of indirect trade via Hong Kong (a “special administrative region” that has the status as a

separate entity in the world trade system), China’s world share of merchandise exports and total

merchandise trade in 2014 reached 14% and 13%, respectively. These numbers indicate the

importance of China in world trade.2

Three characteristics of China’s international trade are of note.

First, trade balance: after a period of persistent trade deficits in the first decade of the reform

era, from the early 1990s onward, China has always run trade surpluses of hefty magnitudes

(Figure 1). This is true even in the period of continuous and rapid appreciation of the yuan

vis-à-vis the currencies of its major trading partners, in 2005-2014. According to Bank of

International Settlements data, between January 2005 and January 2015, China’s nominal

effective exchange rate appreciated by 46% while the real (consumer price index-based)

effective exchange rate appreciated by 54%.3

Second, growth: both exports and imports have registered a very substantial acceleration of

growth since the turn of the century. As can be computed from the data in Table 1, the

average rate of nominal annual growth of exports and imports was 14.0% and 12.9%,

respectively, in the period 1980-2000. The growth then accelerated to 17.4% and 16.7%,

respectively, in the period 2000-2014. Conversely, trade surpluses amounted to US dollar 382

billion in 2014, which was equivalent to 3.7% of GDP in that year (the ratio increased further

to 5.4% in 2015, which was almost unique amongst major trading economies of the world).

Third, composition of exports and imports: manufacturing exports have expanded much faster

than total exports, so that their share in total exports increased from 50% in 1980 to 95% in

2014. In contrast, manufacturing imports as a share of total imports increased only slightly,

from 65% to 67%. Meanwhile, exports under the trade category “machinery and transport

equipment” have registered the fastest expansion. Their shares in total exports increased from

5% in 1980 to 46% in 2014. And the ratio of exports to imports under this category increased

from 0.16 to 1.48. Exports under this category are not really labour-intensive relative to the

total of manufacturing exports. This is because, in terms of production characteristics, the

concerned industrial branches typically have a level of labour productivity that is on a par

with that of the manufacturing sector as a whole throughout the reform era.


4

[Figure 1 about here], [Table 1 about here]

These three developments are almost unique to China on the world scene. Taken together,

they suggest that the expansion of China’s international trade, particularly since the turn of the

century, cannot be in any significant measure accounted for by exchange rate manipulation. Nor can

the expansion be simply reduced to the working of the principle of endowment-determined

comparative advantage. Productivity growth, and industrial upgrading, might have been the far more

important driving forces.

Along with the expansion in the total of China’s international trade, the acceleration of the

expansion of its trade with the rest of the developing world has been even more spectacular. Between

2000 and 2014, the average nominal rate of growth in its total merchandise trade with developing

economies (“low-and-middle-income economies”) registered 23% per annum, compared to that with

developed economies (“high-income economies”) of 15%. Moreover, whilst China has been running

surpluses with developed economies, its trade with developing economies has persistently been in

sizeable deficits. The trade imbalances have been caused by China’s absorption of commodities from

other developing economies. Significantly, during this period, China witnessed continuous worsening

of its terms of trade, whereas the opposite was true for the developing world as a whole. Between

1998 and 2013, China’s net barter terms of trade decreased by a hefty magnitude of 32%. This stood

in contrast to the modest decrease (6%) for developed economies, and the massive increase (35%) for

all developing economies including China itself (Figure 2).

[Figure 2 about here]

In this connection, the expansion in both inward and outward flows of foreign direct

investment (FDI) has been equally spectacular (Figure 3). Since the early 1990s until the present time,

China has always been one of the world’s main recipient economies of inward FDI. Since the turn of

the century, China’s outward FDI has also expanded very fast. It has become a major supplier of FDI

in the world. In the year 2014, outward FDI flow from China (mainland) amounted to US$ 123

billion, accounting for 9.1% of the world total. This is the third biggest in the world, after the United

States and Hong Kong. And it is well-known that the main part of Hong Kong’s outward FDI has

actually been carried out by subsidiaries of mainland Chinese companies.


Three characteristics of China’s outward FDI are of note.

First, geographical distribution: hitherto, the lion’s share of China’s outward FDI has flown to

the developing world, although investment in developed economies has increased at a faster

pace in recent years. In 2014, 79% of China’s outward FDI flows went to developing


5

economies (together with another 1.3% to transition economies). In the same year, of the total

stocks of China’s outward FDI, 84% were in developing economies (Table 2).

Second, sectoral distribution: hitherto, China’s outward FDI has concentrated in activities that

appear to be trade-related. These include business services, wholesale and retail sales, and

finance, which combined to account for 64% of the total stocks of China’s outward FDI in

2014. Nevertheless, there was a high degree of variation across different continents. In Asia,

the top four sectors were: business services (40.1% of the stocks of China’s outward FDI in

that region), wholesale and retail sales (13.5%), finance (13.5%), and construction (12.4%). In

Africa, the top four sectors were: construction (24.7%), extraction (24.5%), finance (16.4%),

and manufacturing (13.6%). In Latin America and Caribbean, the top four sectors were:

business services (57.0%), finance (18.3%), wholesale and retail sales (8.0%), and extraction

(5.1%). It can be observed that, whilst the patterns in Asia and Latin America and Caribbean

gear towards trade-related activities, that in Africa is typical of an exchange of “building

infrastructure for getting resources as compensation”.4

Third, agents of investment: hitherto, state-owned enterprises (SOEs) have played a more

important role than non-SOEs in carrying out the investment. By the end of 2008, of the

stocks of outward FDI, 70% was accounted for by SOEs. The share decreased to 55% by the

end of 2013 (and this share remained basically the same by the end of 2014), while, at the

same time, another 31% was accounted for by limited liabilities companies with mixed

ownership. This change reflects partly the ownership reform of Chinese SOEs. It also reflects

partly the division of labour between SOEs and non-SOEs: SOEs, typically of much bigger

sizes and much less profit-oriented, and their activities being associated with state strategies

and supports, tend to pave the way for the subsequent entry of non-SOEs.5

[Table 2 about here]

On the whole, as far as Chinese investment in the rest of the developing world is concerned,

serving merchandise trade seems to have been the main consideration. In conjunction with the

patterns of China’s international trade, particularly its trading relationship with developing economies,

it can be further inferred that the trading in question has been mainly an exchange of manufactures for

commodities. This seems true not only explicitly in China’s investment in Asia and Latin American

but also, more implicitly and specifically, in China’s investment in Africa in the form of “building

infrastructure for getting resources as compensation”. Incidentally, with the large-scale construction

work and the infrastructure in place, in recent years, Africa has also become a significant destination

of (mainly labour-intensive) industries relocated away from China. A capital-labour relationship has

thus gradually emerged in the economic relations between China and Africa.


6

3. The Theses of “Crowding-out” and “Under-cutting”

The tremendous expansion of China’s manufacturing exports since the turn of the century has given

rise to widespread concerns over its impact on industrialization in other developing economies. Have

Chinese products displaced the manufactures by other developing economies, in their home markets

and/or in the international markets? Or, have Chinese exports squashed the space that could have been

available for industrialization in the rest of the developing world? These questions are what the thesis

of “China crowding-out” has sought to answer.

Existing studies have tended to give an affirmative answer to one or both of the above two

questions. These include studies on the displacing effect of Chinese exports on the manufacturing

sectors in East Asia (Hart-Landsberg and Burkett 2005), in Sub Saharan Africa (Giovannetti and

Sanfilippo 2009; Kaplinsky 2008; Kaplinsky, McCormick and Morris 2007, 2010), and in Latin

America (Gallagher, Moreno-Brid and Porzecanski 2008; Jenkins 2008, 2010, 2012; Jenkins, Peters

and Moreira 2008). These are mostly case studies of particular regions, countries, or industries.

Yet, at the aggregate level, the world share of manufacturing exports from developing

economies excluding China actually increased during this period, from 11.5% in 1999 to 14.5% in

2014 (Figure 4). Given that the export share of East Asian developing economies outside China

remained basically unchanged during this period, at around 4.5% both in 1999 and 2014, this increase

in world export share has been entirely accounted for by developing economies outside East Asia. The

same pattern is observable regarding the world shares of manufacturing value-added: between 1999

and 2013, all developing economies excluding China increased from 11% to 16.2%, of which East

Asia excluding China increased from 2.2% to 3.9% (Figure 5). On the whole, displacement effect in

the absolute sense of directly suffocating industrialization in the rest of the developing world, though

found to be widely presence in the case studies, does not seem to be true for characterizing the overall

picture of the impact of China’s export expansion.

[Figure 4 about here], [Figure 5 about here]

How about displacement in the relative sense, of squashing the space for industrialization in

the rest of the developing world? Existing studies mostly point to the issue of “primarization”. It is

observable that, both due to competition by Chinese exports and the structure of their bilateral trade

with China, many developing economies have increasingly turned to specialize in the production and

export of primary commodities (Jenkins 2012; Rosales and Kuwayama 2012; Sandrey and Edinger

2011). In addition to this point, also note that the increase in the world share of manufacturing exports

from the rest of the developing world has very substantially lagged behind that from China. Between

1999 and 2014, China’s share increased by more than 12 percentage points, whereas the rest of the

developing world increased by merely three percentage points. The contrast in the increased world


7

shares of manufacturing value-added is even more spectacular: between 1999 and 2013, China had an

increase by 20.3 percentage points, while the rest of the developing world increased by 6.2 percentage

points (of which East Asia excluding China increased by 1.7 percentage points). Surely, should there

be no “China factors”, the rest of the developing world could have gained a much bigger space for

pursuing industrialization?

Or is the impact of “China factors” conjunctural in nature, rather than structural? The relative

performance of China vis-à-vis the rest of the developing world in manufacturing exports and value-

added appears to be correlated with differences in productive investment. Between 1999 and 2013,

China’s world share of gross capital formation increased by 18.5 percentage point, while the rest of

the developing world increased by 6.6 percentage points (of which East Asia excluding China

increased by 2.4 percentage point). This correlation gives rise to the question as to what is the

direction of causation between export and output performance, on the one hand, and investment, on

the other hand. Insofar as the causation starts with investment, the relative performance in export and

output might well be mainly caused by factors other than the crowding-out effects by China. As can

be seen from Table 3, the average ratio of gross capital formation to GDP, for the period 2000-2014,

is 43% for China and 24% for all developing economies excluding East Asia (and 27% for East Asia

excluding China). Compared with the average ratios in the preceding decades, there is a very

significant increase for China, whilst the rest of the developing world excluding East Asia remains

more or less at the same levels. Thus, both in international and historical comparisons, the rest of the

developing world has suffered from problems of insufficiency in productive investment.

[Table 3 about here]

The issue of “primarization” is relevant for considering the possibility of a reversed causation

that runs from underperformance in manufacturing exports and output to investment. Conceptually,

this causal relationship can be due to (lack of) capability and/or incentive. Industrialization requires

investment utilizing available economic surplus. Lack of capability refers to insufficiency in surplus

due to outflows, while lack of incentive refers to the misuse of surplus. The pattern of international

trade known as the “old (or colonial) international division of labour”, where backward economies

export commodities in exchange for importing manufactures from advanced economies, is often taken

as the classic case of “primarization” suffocating late industrialization.

The “China factors” – competition in the world market, bilateral trade, direct investment, etc.

– are at any rate unlikely to have caused surplus transfers from other developing economies to China.

Recall that, alongside the expansion of China trade, there was a trend of continuous improvement of

the terms of trade for the rest of the developing world. Take the examples of two countries, in Africa

and Latin America, respectively, which are representative of developing economies that export

commodities to China in exchange for manufactures, over the period 2000-2013, the net barter terms


8

of trade increased by 158% for Angola and 26% for Brazil. These numbers stand in contrast to the

decrease by 25% for China.6 Ostensibly, it is lack of incentive, due to broader political-economic

problems, that has blocked the utilization of incomes from the China-related commodity booms to

investing in industrialization in the relevant developing economies.

The contrast in productive investment, between China and the rest of the developing world,

can also serve as counter-evidence to the thesis of “under-cutting”. The thesis states that cheap labour

has been the main factor behind China’s export competiveness, and, through the pressure of

competition, it has also forced the rest of the developing world to cheapen labour. A process of the

“race to the bottom” in labour standards, where the bottom is allegedly defined by the conditions of

labour compensation and protection in China, has thus been at worked on the global scale (Chan

2003; Foster and McChesney 2012; Hart-Landsberg and Burkett 2006, 2011; Walker and Buck 2007).

This thesis is inconsistent with the characteristics of China’s international trade and industrial

production, noted in the previous section. Recall the rapidly rising share, in China’s total exports, of

machinery and transport equipment, which cannot be classified as labour-intensive judging from the

criterion of relative labour productivity. Recall also the fast expansion of China’s total exports, and

the persistence of hefty trade surpluses, amid the massive appreciation of the yuan. In addition, note

that wage rise was rather rapid precisely during this period of China’s rapid expansion in international

trade and outward investment. Between 2000 and 2014, the average annual growth of real wage rate

was 11.2% for urban registered employees and 10.3% for migrant workers, both exceeding the 9.2%

of the average annual growth of real per-capita GDP (Figure 6). To achieve the export expansion amid

the currency appreciation and wage rise thus required sufficiently fast growth in labour productivity.

Indeed, measured as per-worker real GDP, labour productivity on average grew by a very high rate of

9.3% per annum in the period 2000-2014. This is substantially higher than the average rate of 7.7% in

the preceding period of 1978-2000. It is conceivable that this acceleration of productivity growth was

associated with the concurrent acceleration of growth in productive investment.


All these said, the “under-cutting” thesis appears to be far less convincing than the alternative

thesis that productive investment was the main driving force behind China’s productivity growth,

industrial upgrading, and therefore export competitiveness. Insofar as the rest of developing

economies did find themselves compelled to cheapen labour with a view of withstanding competition

by Chinese manufactures, this might have been mainly due to their insufficiency in productive

investment. Again, the sources of this insufficiency might have been related to problems of the

broader political-economic conditions.


9

4. The Broader Context: Imperialism in our Times?

The assertion, or suspicion, that China’s political economy is heading towards imperialism has been

raised mostly by journalistic commentators or political activists (see, e.g., Bond 2016; Rousset 2014;

Turner 2015). Nevertheless, this assertion does have its scholarly backing associated with the thesis of

“primarization”: the trend of (relative) de-industrialization in the developing economies that engage

with China’s international trade and outward investment has been taken as clear evidence of Chinese

imperialism. Ultimately, insofar as this assertion has intellectual insights (rather than simply judging

the real world from ideological doctrines), it has been based on a variety of theories of the “new

imperialism”, which have prevailed in the political left since the turn of the century.

Central to theories of the “new imperialism” are concerns over the relationship between

(national or transnational) capital and the state, and between rival states, in the context of

globalization (Callinicos 2009; Harvey 2003; Wood 2005). This approach does not presume that

capital-labour relations – which, after all, are the defining characteristic of capitalism – are

unimportant as underpinning of imperialism, but it is taken as given that capital-labour relations have

already fully penetrated into major parts of the world. And it is posited that China’s political

economy has already become capitalist. Indeed, China is considered to be an intrinsic part of the

neoliberal capitalist world economy (Hart-Landsberg 2005; Harvey 2005; Panitch and Gidin 2012).

With these theories plus the observations over China’s expansion in international trade and outward

investment, as well as China’s engagement in inter-state rivalries, the concerned scholars have little

hesitation to reach the judgement that China is heading towards imperialism.

But, theoretically, can global capitalism as a system be understood as simply a sum total of

individual capital-labour relations? This is plausible, but not necessarily so. It rests on the systemic

dynamics, or system-wide mode of capital accumulation, in the particular historical epoch. For one

thing, individual capitals have the natural inclination towards pursuing profits via speculation instead

of production, only to result in depressing productive investment at the aggregate level. For another,

at every level of investment, individual capitals have the natural inclination towards minimizing

labour cost, only to result in depressing aggregate consumption. Thus, the continuous existence of the

system of capitalism necessitates the working of some authorities of total capital, i.e., state power, as

countervailing force to the self-defeating natural inclinations of individual capitals. Whether the

arrangement of state power, at the global-systemic level, serves the general interests of total capital or

the special interests of sections of individual capitals is history-specific. It seems generally true,

however, that more powerful sections of capitals tend to have more influence over state power.

Capitalist imperialism entails the dominant sections of capitals, from the “North” (developed

economies), exploiting not only labour at home but also labour in the “South” (developing

economies). In other words, an essential characteristic of global capitalism is the division between


10

exploiting and exploited economies, and this division is more fundamental than capital-state relations

and inter-state rivalries in determining the welfare of the majority of the world population (Foster and

McChesney 2012; Smith 2016). The word “exploitation”, though, is not always accurate, if it is used

in the Marxian sense of the creation and extraction of surplus value within the capitalist mode of

production. For, capitalist globalization does not necessarily entail the spread of capital-labour

relations at the individual level. Globalization results in the spatial expansion of the system of

capitalism, but not necessarily the capitalist mode of production. A more general formulation can be

used instead: namely, surplus transfer from developing to developed economies. The precise content

of surplus transfer, including the importance of “exploitation” therein, depends on the systemic

dynamics in the particular historical epoch.

The systemic dynamics of capitalism in our times can be gauged by examining the core policy

doctrines of globalization. The doctrines, known as the Washington Consensus, are neoliberal in

nature and have been composed of three generations of policies: market and trade liberalization,

privatization of public assets and services, and financial liberalization especially concerning de-

regulation of cross-border capital flows. These three generations of policies combine to give rise to a

process of financialization, where economic resources have become increasingly financially tradable.

And speculative financial activities have increasingly dominated the world economy. It can be posited

that, since the early 1990s, financialization has been central to the systemic dynamics of capitalism,

and financial hegemony has been at the centre of the system.

Financialization, or capital being increasingly oriented towards speculative activities,

necessarily leads to crowding-out productive, long-term investment. This crowding-out also tends to

worsen income distribution, thereby depressing consumption growth. Consequently, there is a natural

tendency of contemporary capitalism heading towards systematic demand deficiency, and hence

economic crises. Meanwhile, the nature of speculative activities is such that they tend to focus on

redistributing profits, not creating profits. Economic crises thus tend to first erupt in the financial

sector, in the form of financial volatility or even financial collapse. The logic of financialization, in

short, is to make itself intrinsically unsustainable (Lazonick 2009; Wade 2006).

In reality, the paradox is that financialization has been sustained for a prolonged period of

time, at least up until the outbreak of systematic crises from 2007-08. Key to resolving the paradox is

the concept of “accumulation by dispossession”, i.e., cheapening productive inputs by means of

neoliberal reforms across the world. Put another way, capital accumulation in the era of globalization

is mainly based on the incorporation of productive resources that have been previously outside the

capitalist world economy. In its original formulation by Harvey (2005), the concept is referred mainly

to “predation, fraud, and thievery” particularly through various forms of wealth- or profit-seizing

speculative financial activities. Harvey also refers the concept to the expansion of the working class,


11

by means of incorporating workers in the developing world into the system. This second point

resembles the thesis of the “new international division of labour”, which is characterized by capital

chasing cheap labour around the world. A process of the “race to the bottom” could then arise if,

through the efforts of neoliberalism, labour supply expands faster than labour demand. The profits so

created and extracted could then serve to sustain the process of financialization.

Harvey in his exposition on the “new imperialism” tends to emphasize predatory activities

while downplaying the importance of labour absorption. This treatment does have its theoretical and

empirical reasons. Theoretically, in the context of financialization, capital in general is inclined to

pursue profits via speculation far more than via production. If possible at all, capital would tend to

dissociate itself from particular input-output configurations in particular spatial locations. Insofar as

production is necessary, avoiding large-scale sunk investment and pushing to the maximum degree of

the substitution of labour for capital, are logical of this inclination. Empirically, there appears to have

some validity with the claim, made by critics of the reality of financialization, that the political-

economic establishments of today’s world have been in a significant measure dominated by the Wall

Street-Treasury-IMF Complex (Bhagwati 2004; Wade and Veneroso 1998). Predatory activities by

speculative finance were quite evident in the series of developmental crises under globalization, most

notably in countries of the former Soviet bloc during the process of market transformation and East

Asian economies during the 1997-98 financial and economic crisis.

All these said about predatory activities, it can be observed and argued that labour absorption

is no less important for “accumulation by dispossession”. At one level, the scale of absorption implies

that its importance must be systematic. The IMF (2007) estimates that, in the period 1980-2005, the

number of workers effectively producing for the world market quadrupled, and that increase mostly

came from developing economies. It is no exaggeration to say that this is the first truly worldwide,

integrated labour market in history. At another level, such a rapid pace of labour absorption has most

likely created a situation that can be dubbed the “Lewis Model on the world scale”: a situation of

unlimited supply of labour from the “South” for employment by capital from the “North”. This being

the case, the implications for world development could be problematic in times of expansion, and

devastating in crisis-ridden times. In the times of expanding labour absorption, the unequal power

between capital and labour entails surplus transfer from the “South” to the “North”. This, in turn,

implies a tendency to induce the developing economies involved to fall into a “low technology, low

compensation” trap. In times of crises, the relevant developing economies tend to bear the brunt of the

systematic shocks arising from demand deficiency, especially because of the lack of domestic demand

as a buffer against the shocks. Predatory financial activities would then come to play in the

developing economies that have been engulfed into the crises.



12

In summary, the preceding characterization of the systemic dynamics of capitalism today can

be illustrated by the logical flows in the upper part of Figure 7. Financialization in the “North”, and

across the world, leads to crowding-out of productive investment and systematic demand deficiency.

Continuous financialization thus tends to increasingly rely on “accumulation by dispossession”, i.e.,

surplus transfer from the “South”. This process of accumulation typically takes the form of predatory

financial activities, together with labour absorption. Predation can occur peacefully, where developing

economies pay seigniorage to developed economies (see below), or in more violent ways of the fire-

sale of productive assets of crisis-ridden developing economies to international financial agents.

Labour absorption, meanwhile, mostly occurs in times of economic expansion. Through the creation

of a situation of the “Lewis Model on the world scale”, surplus transfer from labour to capital, and

therefore from the “South” to the “North”, becomes systematic. Some developing economies could

benefit from this labour absorption, if they manage to raise their labour productivity fast enough to

more than compensate for the surplus transfer. But this must be exception, rather than the norm, in the

context of the crowding-out of productive investment and the tendency of the “race to the bottom”.

5. The “China Factors” in Perspectives

Has China been an exploiting, or exploited, economy vis-à-vis the rest of the developing world under

neoliberal globalization? This question is crucial for ascertaining whether or not it is heading towards

imperialism. Meanwhile, of a broader concern, has China’s “going out” been reinforcing, or

undermining, the systemic dynamics of global capitalism as characterized in the preceding section?

Answering this second question is important for world development, irrespective of any trace of

imperialism with China. The answer to both of these two questions, put succinctly, is that China has

been submissive-cum-resistant to the systemic dynamics of global capitalism.

Consider labour absorption. It is almost universal perception that China has followed a path of

labour-intensive, export-oriented industrialization in the main part of the reform era up until recently.

Incorporating Chinese labour into the world market has played a crucial role in the formation of the

“Lewis Model on the world scale”. Recall the IMF estimate that the effective labour force of the

world market quadrupled between 1980 and 2005. This estimate is constructed by summing over the

national data of total labour forces adjusted by their export-to-GDP ratios. Using a simpler aggregate

measure of the same indicator, the number of workers effectively producing for the world market in

2005 is founded to be 2.28 times of that in 1980, whilst the estimate for all developing countries is

3.79 times and that for China alone is 8.65 times. Put another way, China accounted for exactly 50%

of the increase in the world total of workers producing for the world market in the period 1980-2005.

The world share of the number of Chinese workers producing for the world market increased from 8%

in 1980 to 32% in 2005, although it then decreased gradually down to 19% by 2013.7


13

Along with labour absorption are the drawbacks as suggested by the literature on imperialism.

The renowned “Foxconn Model”, a model of manufacturing sweatshops controlled by transnational

capital, has often been cited as representative of the Chinese economy as the “world factory”. It is

symptomatic of such developmental drawbacks as low capital-labour ratio, high work intensity and

low compensation at the micro level, and under-consumption at the macro level. The ultimate result is

surplus outflows in times of expansion, and severe excess capacity in crisis-ridden times (Foster and

McChesney 2012; Hart-Landsberg and Burkett 2006; Smith 2016).

But, is the “Foxconn Model” really representative of the Chinese economy? At best, it might

be representative only of the sector of processing trade – manufacturing activities that import parts

and components, assemble into finished products, and re-export to the world market. Exports under

the category of processing trade have persistently accounted for approximately half of the total value

of China’s merchandise exports from the mid-1990s until recent years. Measured as the ratio of net to

gross exports, the ratio of domestic value-added of processing trade steadily increased from around

20% in the mid-1990s to reach 45% by 2009. The value-added in 2009 was equivalent to no more

than 5% of China’s GDP. In other words, the Chinese economy is of a dualistic structure, and

processing trade is no more than an enclave sector of it.8

The mainstay of Chinese economic development since the mid-1990s cannot be characterized

as a process of labour-intensive, export-oriented industrialization. Recall the analysis of China’s trade

performance in Section Two, and the critique of the thesis of under-cutting in Section Three. The

rising share of machinery and transport equipment in total exports, the persistence of trade surpluses

amid currency appreciation, the continuous wage rise, and, most fundamentally, the fast productivity

growth, all indicating that cheap labour can hardly be a significant underpinning of China’s export

and economic growth. Sustained rapid growth in productive investment, in defiance of the broader

context of financialization, is far more important. In fact, it has been suggested that, since the mid-

1990s, Chinese economic development has exhibited a tendency of converging to what can be termed

the “Golden Age Model”, i.e., the economic model that prevailed in advanced capitalist economies in

the era 1950-1973. Characteristic of the model is synchronous growth in labour productivity and the

wage rate, which, in turn, underpins synchronous growth in investment and consumption. It is with

this tendency that China has been able to sustain its income growth, and therefore its absorption of

primary commodities on a gigantic scale. This import appetite, together with the inclination to depress

export prices by the sector of the “Foxconn Model”, explains the spectacular trend of deterioration of

China’s terms of trade with the rest of the developing world.9

Now, consider issues of predation. In the first decade of the Twenty-first Century, amid

unprecedentedly fast economic growth in most developing economies, there was a notable trend in the

world of finance: massive increases in the official holding of reserves in foreign exchange by


14

developing economies. Measured as a ratio to their monthly-average import values, the official

holdings by developing economies increased from 5.2 months in 2000 to 11.8 months in 2010. The

ratio for China alone increased from 7.9 to 21.6 months. In contrast, the ratio for developed

economies increased only slightly, from 2.4 to 3.1 months (Figure 8). This trend of massive capital

flows from developing to developed economies appears to turn on the head of neoliberal doctrines of

globalization, which promise capital flows rather in the opposite direction to promote economic

development. It seems developing economies in general learned a lesson from the 1997-98 East Asian

financial and economic crisis: in the face of increasing financialization of the world economy, they

had to accumulate reserves for protecting their currencies against speculative runs. Yet, given the low

rates of returns to the reserves, the accumulation entails paying seigniorage to the developed countries

that issue reserves currencies – a tributary transfer of economic surplus to the financial hegemons of

the world.


The situation with China could be considered as the extreme of this outward surplus transfer.

In addition to facing the general pressure of financial speculation in the world market, China has had

to confront conundrums arising from what McKinnon and Schnabl (2009) terms “currency

mismatches”. Whilst being the biggest trading economy in the world, with the biggest trade surplus,

China’s currency is not sufficiently important in the existing international monetary system for

financing the surplus. It thus had to accumulate reserves in the period 2000-2010. Worse, pressed by

its trading partners for reducing trade surplus, it had to allow its currency to continuously appreciate

after 2005, and this invited massive inflows of “hot money” only to further increase official reserves.

Currency mismatches cost China dearly not only in terms of surplus outflows, like other developing

economies, but also largely circumscribes its space for independent monetary policies.

Things seem to have worsened after 2008, both for China and the rest of the developing

world. Amid the unfolding Great Recession, predatory activities via hegemony in the international

monetary system have become all the more reckless. It is reported that the series of Quantitative

Easing in developed economies resulted in the flooding of “hot money” in developing economies,

and, with leveraged effects, generated serious asset bubbles (Palma 2015). The reverse flows after

2014, again with very large leveraged effects, resulted in bursting of the bubbles. These inflows and

outflows of “hot money”, manipulated by the financial hegemons of the world, have been exceedingly

harmful to developing economies. China, for one, has suffered from the associated booms and busts

with its asset markets over the era of the Great Recession. Its loss of foreign exchange in 2015 due to

capital flights, for instance, is estimated to amount to between 600 and 800 billion US dollar. The

severe fluctuations in its stock market in 2015, and with it fluctuations in its exchange rate, were to a

significant measure related to these inflows and outflows of “hot money”. Nevertheless, thanks to the


15

still existing controls over core items of its capital account, China appears to have suffered much less

than other developing economies from the erratic flows of “hot money”.10

McKinnon and Schnabl (2014) summarize the policy orientation of China’s state leadership

in response to the conundrums of “currency mismatches”. After 2008, China speeded up the process

of the internationalization of its currency, the Renminbi yuan, and one set of policy measures being

taken centre on opening up the domestic financial market. Yet, these measures have proved to be

problematic in the context of the existing hegemony in the international monetary system and its

manipulation under the Great Recession. As indicated in the preceding paragraph, the massive inflows

and outflows of “hot money” have caused booms and busts in the domestic asset markets. Worse, they

have also caused serious crowding-out effects on productive investment, forcing Chinese industrial

firms to become increasingly speculation-oriented. It appears that the Chinese leadership is confronted

with a dilemma today. The likely outcome of promoting yuan internationalization under the existing

international monetary system is, at best, to financialize the Chinese economy with a hope of sharing

the hegemony, i.e., to transform it into purely a part of neoliberal globalization. The more likely

outcome, however, is to fall prey to the existing financial hegemons of the world.

In summary, the logical flows in the lower part of Figure 7 illustrate the position of China in

relation to the systemic dynamics of capitalism today. It has been partly submissive to the dynamics,

in the form of the “Foxconn Model” in production and falling prey to international speculative

interests in finance. It has also been partly resistant to the dynamics, in the form of the domestic

structural-institutional arrangements that have generated the tendency of converging to the “Golden

Age Model”. In recent years, the Chinese leadership has initiated a range of international programmes

– the “One Belt, One Road” programme, the Asian Infrastructural Investment Bank, the New

Development Bank, etc. – aimed at reshaping the economic landscapes of the world. And one

objective of the programme is to promote yuan internationalization in a way that forces finance to

serve productive activities, rather than attempting to join the existing, speculation-oriented financial

hegemons of the world. The success or failure of this pursuit of an alternative to the existing systemic

dynamics of capitalism will be of fundamental importance, not only for China itself but also for the

future prospects for world development.

6. Conclusions

What has been the impact of China’s “going-out” on world development? The analysis in this paper

suggests that, on balance, the “China influences” have been more on the positive side than on the

negative side. This judgement is based on a critique of existing negative views in terms of what has

happened, and positing a positive view in terms of what would have happened without the influences.


16

Existing negative views have coalesced around the theses of “China crowding-out the

manufacturing production and export by other developing economies” and “China under-cutting the

wage rates of the world working class”. For the first thesis, this paper provides empirical evidence to

argue that it is flawed at the systematic level. The rest of the developing world has had considerable

expansion in manufacturing production and export, precisely in the period that China became a world-

significant player in international trade and investment. For the second thesis, this paper argues that it

is wrong because China’s trade expansion has been sustained mainly by productivity growth rather

than labour exploitation. In both instances, the contrast in production and trade performance is instead

attributed to the difference between China and other developing economies in productive investment.

In the construction of the positive view, this paper engages with the existing studies focusing

on what is meant by imperialism in the era of globalization. Scholars that insist on dubbing Chinese

political economy imperialist typically point to China as a capital-exporter, and its inclination to

driving other developing economies towards “primarization”. Yet, imperialism by nature necessarily

entails cross-country transfers of economic surplus, but there is no evidence of such transfers from

other developing economies to China. It is posited in this paper that, in the era of neoliberal

globalization, imperialism takes the specific forms of financial predation and labour absorption – both

leading to under investment across the world. In this context, China has been an exploited, rather than

exploiting, economy. Thanks to its elements of resistance against neoliberalism, Chinese political

economy has been mainly production-oriented in nature. This nature, by promoting productive

investment both domestically and in the broader developing world, has served as a countervailing

force against the speculation-oriented nature of the world market.

This positive view, to be sure, is no more than tentative. It rests on a particular interpretation

of imperialism in our times, which, whilst being consistent with a range of stylized facts of world

development as presented in the paper, is still mainly hypothetical in nature. Nor can the character of

Chinese political economy, and its impact on world development, be assumed to be fixed in the

future. Much depends on the rivalry between the submissive elements and the resistant elements vis-à-

vis the financialization-driven, speculation-oriented systematic dynamics of world capitalism.

Whether the influences of China’s “going out” are to continue to translate into world development in

the future, or to turn to become detrimental, therefore, is a matter of continuous evolution.

Footnotes:

1. Data from World Development Indicators, accessed 16 January 2016.

2. For various reasons including data consistency, “China” in this paper refers to mainland China

only, i.e., not including Hong Kong, Macau and Taiwan. China’s total exports to the world,


17

including indirect exports via Hong Kong, are estimated as the sum of China’s exports to the

world plus Hong Kong’s exports to the world minus Hong Kong’s imports from China. Indirect

trade data from Asian Development Bank, Key Indicators for Asia and the Pacific, various issues;

others from World Bank World Development Indicators.

3. Data from Bank of International Settlement, Effective Exchange Rate, accessed 5 March 2016.

4. Data from Ministry of Commerce of China, 2014 Statistical Bulletin of China’s Outward Direct

Investment.

5. Data from the same sources as note 4.

6. Data from the same sources as Figure 2

7. Data from UNCTADsta, accessed 8 May 2016.

8. See Lo (2013) for a detailed analysis.

9. See Lo (2016) for a detailed analysis of the convergence of Chinese economic transformation to

the “Golden Age Model” from the mid-1990s onward, and the interruption to this convergence

post-2008 due to the process of financialization.

10. In principle, given the existing system of capital controls in China, the sum total of the following

three items of cross-border capital flows should be approximately equal to zero: current account

balance, the balance in foreign direct investment, and the change in official reserves. Yet,

according to the 2015 balance of payment data, the actual sum total was a negative amount of US

dollar 958 billion. Possible reasons for this result include the revaluation of official reserves due

to exchange rate changes, net repayment for foreign debts, transfer of foreign exchange from

official reserves to private hands, and capital flights. Estimates of the scale of capital flights (and

“hot money” outflows) vary, from US dollar 600 to 800 billion.


18

References

Bhagwati, J. (2004) In Defense of Globalization, Oxford, Oxford University Press.

Bond, P. (2016) “China’s path into Africa blocked”, Pambazuka News,

http://www.pambazuka.org/global-south/china%E2%80%99s-path-africa-blocked.

Callinicos, A. (2009) Imperialism and Global Political Economy, Cambridge (U.K.): Polity.

Chan A. (2003) “A ‘race to the bottom’: globalisation and China’s labour standards”, China

Perspectives, no.46, http://chinaperspectives.revues.org/259

Foster, J.B. and R. McChesney (2012) The Endless Crisis: How Monopoly Finance Capital Produces

Stagnation and Upheaval from the USA to China, New York: Monthly Review Press.

Gallagher, K., J.C. Moreno-Brid, and R. Porzecanski (2008) “The dynamism of Mexican exports: lost

in (Chinese) translation?”, World Development, 36 (8): 1365-1380.

Giovannetti G., and M. Sanfilippo (2009) “Do Chinese exports crowd-out African Goods? An

econometric analysis by country and sector”, European Journal of Development Research, 21:

506-530.

Hart-Landsberg M. and P. Burkett (2005) China and Socialism: Market Reforms and Class Struggle,

New York: Monthly Review Press.

Hart-Landsberg M. and P. Burkett (2006) “China and the dynamics of transnational accumulation:

causes and consequences of global restructuring”, Historical Materialism, 14 (3): 3-43.

Hart-Landsberg M. and P. Burkett (2011) “The Chinese reform experience: a critical assessment”,

Review of Radical Political Economics, 43 (1): 56-76.

Harvey, D. (2003) The New Imperialism, Oxford, Oxford University Press.

Harvey, D. (2005) A Brief History of Neoliberalism, Oxford, Oxford University Press.

International Monetary Fund (IMF) (2007) World Economic Outlook, April.

Jenkins, R.O. (2008) “Measuring the competitive threat from China for other Southern exporters”,

The World Economy, 31 (10): 1351-1366.

Jenkins, R.O. (2010) “China’s global expansion and Latin America”, Journal of Latin American

Studies, 42: 809-837.

http://www.pambazuka.org/global-south/china%E2%80%99s-path-africa-blocked

http://chinaperspectives.revues.org/259


19

Jenkins, R.O. (2012) “Latin America and China: a new dependency?”, Third World Quarterly, 33 (7):

1337-1358.

Jenkins, R.O., E.D. Peters, and M.M. Moreira (2008) “The impact of China on Latin America and the

Caribbean”, World Development, 36 (2): 235-253.

Kaplinsky R. (2008) “What does the rise of China do for industrialisation in Sub Saharan Africa?”,

Review of African Political Economy, 35 (115): 7-22.

Kaplinsky, R., D. McCormick, and M. Morris (2007) “The impact of China on Sub Saharan Africa”,

IDS Working Paper no.291, http://www.ids.ac.uk/files/Wp291.pdf

Kaplinsky, R., D. McCormick, and M. Morris (2010) “China and Sub Saharan Africa: impacts and

challenges of a growing relationship”, in V. Padayachee ed., The Political Economy of Africa,

London: Routledge.

Lazonick, W. (2009) Sustainable Prosperity in the New Economy?, Kalamazoo, Michigan: W.E.

Upjohn Institute for Employment Research.

Lo, D. (2013) “China and world development – beyond the crisis”, in N. Yokogawa, J. Ghosh and R.

Rowthorn (eds.) Industrialization in China and India: Their Impacts on the World Economy,

London, Routledge

Lo, D. (2016) “China confronts the Great Recession: ‘rebalancing’ neoliberalism, or else?”, in P.

Arestis and M. Sawyer (eds.) Emerging Economies During and After the Great Recession,

(International Papers in Political Economy 2016 ), Basingstoke, Palgrave Macmillan.

McKinnon, R. and G. Schnabl (2009) “China’s financial conundrum and global imbalances”, BIS

Working Papers no.277, Bank of International Settlement,

http://www.bis.org/publ/work277.pdf

McKinnon, R. and G. Schnabl (2014) “China’s exchange rate and financial repression: the conflicted

emergence of the RMB as an international currency”, China & World Economy, 22 (3): 1-34.

Palma, J.G. (2015) “Why corporations in developing countries are likely to be even more susceptible

to the vicissitudes of international finance than their counterparts in the developed world: a

tribute to Ajit Singh”, Cambridge Working Papers in Economics, CWPE 1539,

http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe1539.pdf

Panitch, L., and S. Gidin (2012) The Making of Global Capitalism: The Political Economy of

American Empire, London, Verso.

http://www.ids.ac.uk/files/Wp291.pdf

http://www.bis.org/publ/work277.pdf

http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe1539.pdf


20

Rosales O., and M. Kuwayama (2012) China and Latin America and the Caribbean: Building a

Strategic Economic and Trade Relationship, Santiago, ECLAC.

Rousset, P. (2014) “Chinese ambitions – an imperialism in formation”, International Viewpoint,

no.474, http://www.internationalviewpoint.org/spip.php?article3468,

Sandrey, R., and H. Edinger (2011) “China’s manufacturing and industrialization in Africa”, African

Development Bank, working paper no.128,

http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Working%20128.pdf

Smith, J. (2016) Imperialism in the Twenty-First Century: Globalization, Super-Exploitation, and

Capitalism’s Final Crisis, New York: Monthly Review Press.

Turner, N.B. (2015) Is China an Imperialist Country? Considerations and Evidence, Kersplebedeb.

Walker, R., and D. Buck (2007) “The Chinese Road: cities in the transition to capitalism”, New Left

Review, no.46: 39-66.

Wade, R.H. (2006) “Choking the South”, New Left Review, 38: 115-127.

Wade, R.H. and F. Veneroso (1998a) “The Asian crisis: the high debt model versus the Wall Street-

Treasury-IMF Complex”, New Left Review, 228: 3-23.

Wood, E.M. (2005) Empire of Capital, London: Verso.

http://www.internationalviewpoint.org/spip.php?article3468

http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Working%20128.pdf


21

Figure 1. China’s Merchandise Trade (current US$ million)

Sources: World Bank World Development Indicators, accessed 16th January 2016.

0

400000

800000

1200000

1600000

2000000

2400000

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

Merchandise exports total

Merchandise exports to high-income economies

Merchandise exports to low and middle-income economies

Merchandise imports total

Merchandise imports from high-income economies

Merchandise imports from low and middle-income economies


22

Table 1. Composition of Exports and Imports (US$ million)

1980 1990 2000 2014 2014/1980

Exports

Total merchandise 181 620 2492 23423 129

Manufactures 90 462 2237 22296 248

Machinery and transport equipment 8 56 826 10705 1270

Imports

Total merchandise 200 533 2251 19592 98

Manufactures 131 435 1784 13123 100

Machinery and transport equipment 51 168 919 7242 141

Exports/Imports ratio

Total merchandise 0.91 1.16 1.11 1.20

Manufactures 0.69 1.06 1.25 1.70

Machinery and transport equipment 0.16 0.33 0.90 1.48

Sources: China Statistical Yearbook, various issues.


23

Figure 2. Net Barter Terms of Trade (1980 = 100)

Sources: IMF World Economic Outlook, various issues; and World Bank World Development

Indicators, accessed 9th November 2015.

40

50

60

70

80

90

100

110

120

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

China Advanced Emerging and Developing


24

Figure 3. China’s FDI (Flows, US$ million)

Sources: China Statistical Yearbook and Report on Development of China’s Outward Investment and

Economic Cooperation, various issues.

0

20000

40000

60000

80000

100000

120000

140000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

outward

inward


25

Table 2. Regional Distribution of China’s Outward FDI

China's outward FDI (flows, US$ million) China's outward FDI (stocks, US$ million)

Total Developing LAC Africa Asia Total Developing LAC Africa Asia

2003 2855 2605 1038 75 1492 33222 31592 4619 491 26482

2004 5498 5065 1763 317 2985 44777 42454 8268 900 33286

2005 12261 11216 6466 392 4484 57206 53563 11470 1595 40954

2006 17634 16565 8469 520 7663 75026 69643 19694 2557 47978

2007 26506 22891 4902 1574 16593 117911 107264 24701 4462 79218

2008 55907 52055 3677 5491 43548 183971 169289 32240 7804 131317

2009 56529 48780 7328 1439 40410 245755 222975 30595 9332 185550

2010 68811 56736 10538 2112 44890 317211 281597 43876 13042 228150

2011 74654 60034 11936 3173 45494 424781 370117 55172 16244 303440

2012 87804 70017 6170 2517 64793 531941 445739 68212 21730 364407

2013 107844 91730 14359 3371 75614 660478 559690 86096 26186 447408

2014 123120 97680 10547 3202 84990 882642 739431 106111 32350 600970

% of

Total

2003 100% 91% 36% 3% 52% 100% 95% 14% 1% 80%

2004 100% 92% 32% 6% 54% 100% 95% 18% 2% 74%

2005 100% 91% 53% 3% 37% 100% 94% 20% 3% 72%

2006 100% 94% 48% 3% 43% 100% 93% 26% 3% 64%

2007 100% 86% 18% 6% 63% 100% 91% 21% 4% 67%

2008 100% 93% 7% 10% 78% 100% 92% 18% 4% 71%

2009 100% 86% 13% 3% 71% 100% 91% 12% 4% 76%

2010 100% 82% 15% 3% 65% 100% 89% 14% 4% 72%

2011 100% 80% 16% 4% 61% 100% 87% 13% 4% 71%

2012 100% 80% 7% 3% 74% 100% 84% 13% 4% 69%

2013 100% 85% 13% 3% 70% 100% 85% 13% 4% 68%

2014 100% 79% 9% 3% 69% 100% 84% 12% 4% 68%

Sources: China Statistical Yearbook and Report on Development of China’s Outward Investment and

Economic Cooperation, various issues.

Notes: LAC = Latin America and the Caribbean. “Developing Economies” do not include “Transition

Economies”.


26

Figure 4. World Shares of Manufacturing Exports

Sources: World Bank World Development Indicators, accessed 7th March 2016.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

L&M income - East Asia

East Asia - China

China


27

Figure 5. World Shares of Manufacturing Value-added

Sources: World Bank World Development Indicators, accessed 15th March 2016.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Low&middle income - East Asia

East Asia - China

China


28

Table 3. Gross Capital Formation and Manufacturing Value-added (average % of GDP)

1960-1979 1980-2000 2000-2014

Gross capital formation (% of GDP)

China 29.86% 37.25% 43.04%

East Asia - China 21.64% 28.74% 26.68%

Low&middle income - East Asia 22.13% 22.45% 23.72%

Manufacturing value added (% of GDP)

China 36.08% 39.44% 39.62%

East Asia - China 16.01% 22.04% 24.97%

Low&middle income - East Asia 16.69% 17.57% 13.90%

Sources: World Bank World Development Indicators, accessed 7th February 2016.


29

Figure 6. Indices of Per-Capital Real GDP and Real Wage Rates (2000 = 100)

Sources: Per-capital GDP and urban wage rate data from China Statistical Yearbook, various issues;

wage rate data for migrant workers from Report on Monitoring and Surveying Migrant

Workers, various issues, and Lu Feng (2012) “Wage rate trends of China’s migrant workers,

1979-2010’, Zhongguo Shehui Kexue (Social Sciences in China), 2012, no.7: 47-67.

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Per-capita real GDP

Real urban wage rate

Real wage rate for migrant workers


30

Figure 7. China Confronts Neoliberal Globalization: An Illustration

Notes: OBOR = One Belt, One Road; AIIB = Asian Infrastructural Investment Bank; Bricks Bank =

New Development Bank.

Neoliberal Globalization: financialization and financial hegemony

Crowding out productive investment + worsening income distribution

Surplus transfer from “South” to “North”

China submissive-cum-resistant to this systematic dynamics of (neoliberal) world capitalism

Pre-2008: dualistic economy Post-2008: increasing financialization

“Foxconn Model” vs. “Golden Age Model” Speculation vs. productive investment

Submissive to neoliberal globalization vs. Resistant to neoliberal globalization

Yuan internationalization by joining Yuan internationalization by forcing

Financialization finance to serve productive investment

(predation + labour absorption) (OBOR, AIIB, Bricks Bank…)

Predation

Seigniorage Bubbles +

capital flights

Labour absorption

Lewis Model on Labour/local capital bearing

the world scale the brunt of demand deficiency


31

Figure 8. Official Reserves in Foreign Exchange as Ratio to Average Values of Imports in Goods

and Services (Months)

Sources: International Monetary Fund (IMF), COFER, accessed 17th May 2015, and World Economic

Outlook, various issues.

Notes: Data are end-of-year foreign exchange reserves of central bank divided by the monthly

average import values of the previous 12 months.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Advanced

Emerging and Developing

China